Tiered property tax rates proposed

Melissa Tanji

Staff Writer

mtanji@mauinews.com

Mayor Alan Arakawa’s budget proposes a tiered scheme for property taxes designed to increase income from second homes and investment properties, a growing trend that many say aggravates Maui County’s housing crisis.

Out-of-state buyers command more than half of the county’s housing market, pricing out residents, affordable-housing advocates say. The median price of a home in the county in February was $685,000, up 1.8 percent from that month in 2017 but down from January’s $705,000.

In his budget address Friday, Arakawa said the “progressive” tiered structure is another way to pay for the projects being proposed in the $820 million fiscal 2019 budget.

“We’re doing this to protect the working-class residents who are having such a hard time out there. The group that we’re planning to increase taxes for can afford to pay a little extra to help the local economy out,” Arakawa said.

The proposed tiered system would affect four property tax categories: residential, apartment, agricultural and conservation. It would ease the tax burden for owners’ first $500,000 of assessed value, keep it the same for $500,000 to $1.5 million and increase it by 50 percent for those portions of values that rise above $1.5 million.

The homeowner category would remain unchanged at $2.86 per $1,000 for the entire amount of assessed value, after the homeowner exemption. Tax rates in other categories would stay the same as well. Real property valuations are up, reflecting rising single-family home and condominium sales prices.

Tiered rate details include:

• Residential. Now at $5.54 per $1,000 assessed value, the tax rate would drop 25 cents, or 4.5 percent, to $5.29 per $1,000 for the first $500,000 of residential value; it would remain unchanged for the portion of homes’ value between $500,000 and $1.5 million; and rise $2.77, or 50 percent, to $8.31 per $1,000 for amounts more than $1.5 million.

• Apartment. Now at $6.32 per $1,000, the tax rate would fall 42 cents, or 6.6 percent, to $5.90 per $1,000 for the first $500,000 of value for apartments; it would stay the same for the next $500,000 and $1.5 million; and go up $3.16, or 50 percent, to $9.48 for amounts of more than $1.5 million.

• Agricultural. Now at $6.01 per $1,000, the tax rate would decline 56 cents, or 9.3 percent, to $5.45 per $1,000 for the first $500,000 of agricultural properties’ assessed value; it would not change for amounts between $500,000 and $1.5 million; and increase $3.01, or 50.1 percent, to $9.02 for amounts more than $1.5 million.

• Conservation. Now at $6.37 per $1,000, the tax rate would drop $3.87, or 60.8 percent, to $2.50 per $1,000 for the first $500,000 in property value; it would keep the status quo for properties’ value from $500,000 and $1.5 million; and rise $3.19, or 50.1 percent, to $9.56 per $1,000 for amounts in excess of $1.5 million.

Budget Director Sandy Baz explained that the proposed increases are not likely to impact residents who already own a home but have a second property that they rent out to others.

The values of the properties owned and rented to residents would likely fall below the $1.5 million range where taxes will not be increased, he said.

And, many farmers would not be impacted because the land values for their properties in agriculture would not hit the highest tax category.

Out of the four categories proposed in the tier, Baz said 18,667 properties would fall in the lowest value category where tax rates would decline, and 9,447 would fall in the middle value category where rates would remain the same.

Only 2,177 properties would end up paying an increased rate for amounts above $1.5 million if the proposal goes through, he said.

The City and County of Honolulu has a similar tiered tax rate for second homes, Baz said.

In addition, the Maui County Council will implement its initiative, approved last year, to separate short-term rental units from hotels and resorts tax classifications. A property tax rate has yet to be decided for the new short-term rentals category.